The Study Of The Correlation Between The Rate Of Stock Return And The Rate Of Inflation In The A-share Market In China

More and more investors has been flashed into the stock market and choosed stock investment as their investment way since Chinese stock market set up.However, now most countries in the world especially America issue excessive currency and it leads to excess global liquidity, Inflation has become a normal world economic phenomenon. In particular, inflation situation has been changing for China’s economy.Whether investing in stocks can withstand inflation risk and act to maintain and increase their value or not? What’s the relationship between the real rate of stock return and the inflation rate.? These problems lead to the universal concern of investors and attract scholars to focus on and research.Before writing this paper, I have found and read a large number of domestic and foreign literature, so I have known western economists’theories about the relationship between the rate of stock returns and inflation rate. Then I process the monthly data of China’s Shanghai A shares yield, the inflation rate, the growth rate of the money supply, the growth rate of industrial added value which is from January1996to March2012,and I divide the time interval into two time periods-before the reform of the shareholder structure(1996.01-2005.04) and after the reform of the shareholder structure(2005.05-2012.03),then I use time series econometric models to do empirical research and come to the conclusion that the relationship between China’s Shanghai A shares real yield and the inflation rate is negative.After doing empirical research, I apply western economists’related theories and investment theory such as the separation theorem、capital market line、the capital asset pricing model (CAPM) and so on to make normative analysis.At last I make some relevant suggestions.This paper is divided into five parts. The first chapter is the introduction,introduces research significance、overseas and domestic research status、research contents and research methods. The second chapter first introduces the core concepts,and then introduces the western economists’ related theories about the relationship between the rate of stock returns and inflation rate, including fisher hypothesis、agency hypothesis、volatility hypothesis、risk premium hypothesis、money illusion hypothesis and reverse causality hypothesis. Chapter Three introduces the stock market situation in the past two decades and the way that the stock market affects the real economy, also it introduces the inflation situation in the past two decades and the inflation’s effect on the national economy and the stock market. Chapter Four is the core part of the full-text. In this chapter I do Johansen cointegration test based on unit root test on the data in the two time intervals before and after the split share structure reform and draw cointegration relationship between the variables,then I carry on Granger causality test and build a vector autoregression (VAR) model, and then I carry on the impulse response analysis and variance decomposition, finally I establish a vector error correction (VEC) model.On the basis of empirical research,I apply the theories of Western scholars in Chapter Two to make simple normative analysis on the negative correlation between the real rate of Shanghai A shares’return and inflation rate,and I apply investment theory--separation theorem、the capital market line and the capital asset pricing model (CAPM) to make deep normative analysis from a new perspective,these normative analysis reasonably demonstrate the empirical research conclusion.In the fifth chapter I make some relevant suggestions on the basis of the above research.